How do I prepare for a 1031 Exchange like a Pro?
1031 Like Kind Exchanges can seem overwhelming, but really you just need the right guidance to be successful. Follow these four tips to prepare like a real estate pro.
1. CONSULT YOUR ACCOUNTANT.
The accountant filing your taxes is your first line of defense to create a successful exchange. Each property is different: depreciation is unique to that property, the basis is unique to the property, and debt to equity ratio is different for each property.
Ask your accountant to calculate how much capital gains tax would be due (if you choose not to do an exchange) and how much money you will save by reinvesting that amount into your next investment property. Your accountant is the first person to answer to the IRS regarding any details of the exchange if there is an audit. Thus, your accountant is a critical part of the process.
Don’t have an accountant? Give us a call because we work with qualified accounting firms that are familiar with 1031 exchanges.
2. PLAN A TIMELINE.
Most 1031 exchanges that we see fail are due to poor planning. The typical scenario looks like this: “Someone suggested that I do a 1031 exchange at the closing table, so I opted to put my sale proceeds with a qualified intermediary at the last minute. Now I can’t find a replacement property and I don’t know what to do.”
Get familiar with the current real estate market so that you can purchase a property that is actually a good investment. Successful exchangers have their eye on a replacement property before they close the sale of their relinquished property. We can help you plan around the 1031 deadlines. The earlier you enlist our help, the more options we can give you to plan a successful exchange.
3. TALK TO A BROKER.
Your broker can help you speed up the process of identifying a replacement property, and increase your chances that the replacement property will add value to your portfolio. Don’t make the mistake of rushing to get a replacement property within the required 180 days, and then end up paying too much money for a marginal property. Talk to a broker to help you find the perfect replacement property before you start your exchange.
4. CHOOSE A BUSINESS SAVVY QI.
Most QI’s earn their fees from taking the interest on your money. We split the interest with you – allowing you to earn money while it is tied up in an exchange account and we offer a higher rate of return than other qualified intermediaries. We look out for your business and your investment.
CALL US TODAY AT (214) 295.6281.